Cloud computing is one of the most overhyped phenomena to have hit the IT industry in a long time. It is a business model that definitely has its advantages. The trouble is vendors of all sizes and stripes are so desperate for a piece of the cloud action, they are willing to blur distinctions and fudge definitions for their own ends.

Their headlong pursuit has saddled cloud computing with so many misconceptions that it is sometimes difficult for customers to make informed business choices. ZDNet UK has looked at the most common myths, and debunks five of them here.

Myth 1: Cloud equals SaaS, grid and utility computing

The term 'cloud computing' has been hijacked by anyone wanting to make a service sound hip and interesting. Jumping on the latest bandwagon is a favourite pastime in the technology industry, but in this case it is creating confusion among customers, who are unsure what they should be asking for or what they're likely to get for their money.

So to clarify: cloud computing is a form of outsourcing by which vendors supply computing services to lots of customers over the internet. These services can range from applications, such as customer relationship management, to infrastructure, such as storage and the provision of development platforms.

The services are provided by massively scalable datacentres running hundreds of thousands of CPUs as a single compute engine, using virtualisation technology. That approach means workloads are distributed across multiple machines — which can also be located in multiple datacentres — and capacity can be allocated or scaled back according to a customer's needs.

Moreover, because applications are multi-tenant in nature — multiple instances of the same package that can be executed on the same machine — system resources can be shared among a large pool of users, which reduces costs.

Software-as-a-service (SaaS) is one of cloud's most recognised manifestations, but strictly speaking it is a subset of the category because not all offerings are massively scalable. This means that, while some SaaS offerings are cloud, cloud is not SaaS.

Grid computing, on the other hand, comprises a networked cluster of heterogeneous, loosely coupled machines. These machines work together to solve a single, generally scientific or technical problem that is either CPU-intensive or requires access to large amounts of data.

The clusters may be located either within a single organisation or form part of a larger-scale public collaboration between many organisations, but each machine runs software that apportions pieces of a program to be processed. This means grid does not provide customers with an outsourced service but rather a way of clustering disparate machines to harness idle compute power.

Utility computing, meanwhile, refers to the packaging of computing resources as metered or subscription services in a similar fashion to those provided by water or gas companies. As a result, cloud can be purchased in an utility computing format, but the one is not predicated on the other.